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Ahead of the Bell: US home construction

February 17, 2016
In this Tuesday, Jan. 26, 2016, photo, a "For Sale" sign hangs in front of a home under construction in Atlanta. On Wednesday, Feb. 17, 2016, the Commerce Department reports on U.S. home construction in January. (AP Photo/John Bazemore)
In this Tuesday, Jan. 26, 2016, photo, a "For Sale" sign hangs in front of a home under construction in Atlanta. On Wednesday, Feb. 17, 2016, the Commerce Department reports on U.S. home construction in January. (AP Photo/John Bazemore)

WASHINGTON (AP) — The Commerce Department reports on January U.S. home construction at 8:30 a.m. Eastern Wednesday.

GREATER CONSTRUCTION: Economists expect that housing starts rose 2.9 percent last month to a seasonally adjusted annual rate of 1.18 million, according to a survey by data firm FactSet. Continued gains would suggest increasing momentum for the construction sector and U.S. consumers. Builders broke ground on the 1.11 million homes last year — the most since 2007.

HOUSING’S FOUNDATIONS: The steady demand for new homes reveals a sharp split in the U.S. economy. Global headwinds, such as uncertainty in China and volatile financial markets, have disrupted overall growth. Yet strong hiring and low mortgage rates have boosted the housing sector as more Americans are purchasing new houses or signing leases for expensive apartments.

The residential market continues to recover from the dramatic crash brought about subprime mortgages nearly a decade ago. Home construction remains well below its annual pace of roughly 1.5 million during the 1990s, a reflection of both higher housing costs and the damaged financial credit that remains more than 6 ½ years after the recession officially ended.

And unlike the housing bubble when builders focused on owners, the industry has shifted more of its efforts to address an increase in renters. Multi-family construction — which includes apartment buildings — reached its highest levels of starts last year since 1987.

Homebuilders expect the demand from buyers to persist, yet their optimism about sales growth has slid before the start of the spring home-selling season next month.

The National Association of Home Builders/Wells Fargo builder sentiment index released Tuesday fell to 58 this month, a decrease of three points from January. The index had stayed in the low 60s since June. Readings above 50 indicate more builders view sales conditions as good, rather than poor.

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